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How to Determine a Property’s Value Using Real Estate Comps

Mark Ferguson
Updated: February 27, 2023 9 min read
How to Determine a Property’s Value Using Real Estate Comps

Real estate comps—the industry term for “comparable properties”—help banks,  real estate businesses, and individual investors determine home values. Real estate comps can even be used by individual home buyers and sellers doing their research before making a property transaction. 

Real estate comps can be a great tool for a beginner or seasoned investor to determine a property’s value, and for them, they play a huge role in how to invest in real estate. The trick in generating an accurate value is gathering as much detail as possible about any given property. Then, calculating real estate comps becomes about making price adjustments on the basis of this detailed information —for example, knowing how much value a swimming pool adds or detracts. Every house is different in some way, and making accurate adjustments is how to calculate monetarily what those differences are worth.

Before diving into real estate investing, make sure you understand how to compare markets and properties. Whether you’re trying to decide between investing in Boise or Sacramento—or you’re just comparing two similar homes—this guide will walk you through all the numbers you need to know. From calculating cash-on-cash return to running a comparative market analysis, the experts at BiggerPockets demonstrate the steps you need to follow and the statistics you must know with The Beginner’s Guide to Real Estate Market Analysis.

What Are Real Estate Comps?

Real estate comps is a term that is used to describe comparable properties in any given geographical area. It’s also a reliable method real estate investors use to determine a property value. If you can find out what the values of comparable properties nearby are, you are more likely to accurately judge how much a property is worth.

The single most important thing to know about real estate comps is that this method of determining the potential value of a property only works if you make like-for-like comparisons. To do that, you need significant information, including the property type, size, and sales history. The golden rule is that you need three active comparable stats, and three previous sales stats, to make an accurate property value prediction. 

Why Are Comps Important in Real Estate Investing?

Real estate comps are like a temperature gauge when buying or selling a property. Using comps allows the investor to get an idea of what people are prepared to pay for comparable properties in the area. Essentially, gathering your comps is a way of performing real estate market research. It’s an important part of a thorough real estate analysis. It helps you, the investor, make better decisions about what your investments are worth or which properties are worth investing in. 

Who Uses Real Estate Comps?

Real estate comps is a broad tool used in all real estate sectors, including individual sales and investment buying. Appraisers also use comps in the home-buying process. However, comps are used slightly differently in these different real estate contexts. Here are the main differences.

How buyers use real estate comps

Buyers use real estate comps to ensure that a home they’re interested in buying is being sold at a fair price. Comps are especially useful to buyers who are moving areas and are unfamiliar with the local housing market. Buyers commonly use comps as a negotiating tool if they feel a home is priced too high.

How appraisers use real estate comps

Appraisers use real estate comps to determine whether a home is valued correctly. Their evaluation is then used by mortgage lenders to decide how much a home is ultimately worth and how much they will lend on a mortgage. 

How sellers use real estate comps

Sellers use real estate comps as a guideline for pricing their homes accurately. This helps to sell a home faster. Real estate sales statistics show that homes that are priced accurately spend less time on the market. 

How real estate agents use MLS comps 

Agents use comps to assist both buyers and sellers. Pricing a home correctly based on comps makes it easier to find buyers in any given area and allows agents to close on real estate deals faster, with fewer negotiations along the way.

How To Get Real Estate Comps

Once you have a subject property, you should set out to find your real estate comps. There are several ways of getting comps depending on your access to resources and willingness to do your own research. 

Use a reputable real estate website to find local comps

Luckily, you can use several reputable real estate websites, although some are more easily searchable for comps than others. You’ll need to do quite a bit of the legwork yourself. You can find comps without having a real estate license on websites such as:

  • Zillow
  • Redfin
  • Trulia
  • Realtor.com

Just make sure not to rely on the Zestimate or Redfin estimates; they are simply not accurate. Instead, find actual comps and put together your own estimate.

Related: Why Real Estate Investors Should Never Rely on Zillow

Ask your real estate agent to procure MLS comps

The easiest way to run a comps analysis is by searching on the MLS or the Multiple Listings Service. However, this database is only accessible to real estate agents. Fortunately, if you are currently working with an agent, you can ask them to get MLS comps for you.

Request a comparative market analysis (CMA)

A CMA is a more in-depth report than simply running a search on the MLS. Your real estate agent can put together a CMA based on a number of factors, including the size and type of property you want to buy or sell. 

It’s important to note that a CMA can be difficult to perform in an area where there are few comparable homes that have sold recently. In that case, you may need a formal appraisal of the property instead. 

How To Find Real Estate Comps Yourself

If you’re not using the services of a real estate agent, for example, because you are an investor, there are several ways you can find real estate comps yourself. Although it can be more time-consuming than having an agent perform a search for you, you can still get decent results using these methods.

Research public property records

The first method is searching public property records. The easiest way to access these is online: each local housing administration or municipality will list public property records that are searchable. Alternatively, you can request to access these records at your county appraisal office. 

Use an online home valuation tool

These days, there is a choice of online home valuation tools you can use to get your comps. The pro of using these is that they take the publicly available property record data and then run them through financial analysis models to get a more accurate estimate of a home’s value. The con is that you won’t know how they do this exactly. Still, tools like Zillow’s Price This Home tool are well worth checking out since it relies on an impressive database of over 100 million homes. 

Search for similar recently sold homes

If you’re investing on a small scale – for example, you are just starting out as a rental investor – it may be easier just to search online real estate listings sites for recently sold homes of a similar size and type in your area. Be aware that housing markets fluctuate considerably over time, so you’ll only want to look at properties sold within the last 3-6 months.

What Are the Factors for Real Estate Comps?

Here are the typical guidelines that most banks and appraisal companies require real estate agents to follow when completing real estate comps. While you can, informally, relax these guidelines—you’re not a licensed appraiser, after all!—consider staying strict. That ensures the accuracy of your pricing.

  • Distance: Within one mile of any urban or suburban neighborhood.
  • Age: Built within 10 years of your property—unless the home is more than 50 years old (feel free to widen the age brackets a bit then).
  • Size/square footage: Only calculate above-ground square footage, which must be within 20 percent of the subject. Basement square footage is calculated separately.
  • Property type: Single-family detached homes must be compared to single-family detached homes, duplexes to duplexes, townhouses to townhouses, etc.
  • Bedroom/bathroom: Only count above-grade bedrooms and bathrooms—and the sample property can only be different by one bedroom or bathroom
  • Style: Try to use the same style of home: a two-story to a two-story, split level to split level, ranch to ranch, etc.
  • Sale date: Proper comps should have sold in the last six months, although many banks prefer three months.
  • Maintenance and Taxes: Both maintenance expenses and property taxes will affect the final value of a home. This is especially important for long-term real estate investments such as rentals because taxes (often don’t kick in until year 2 of property ownership) and maintenance will reduce your rental gains. You should always factor in local property taxes – or contact a local appraiser and ask them to give you an idea of how much a home value for a specific property type will be affected by taxes.
  • Finishes and Renovations: Renovations can significantly affect the value of a home. Suppose you’re looking at a property that has had substantial renovations, especially with additions or modifications (e.g., an extension, loft conversion, pool, etc.). In that case, you should compare it with properties with similar renovations. If you can’t find any properties that have been altered in a similar way, your best bet is to try and make a value adjustment after running your comps.
Screenshot 2023 02 27 at 10.23.41 PM

How Do You Make Adjustments for Real Estate Comps? 

Adjust the price of any comparable properties if they are superior or inferior to your purchasing property. If a comp sold for $180,000, then you add or subtract adjustments to account for positive or negative features of your property. That helps you determine an exact price.

Calculating adjustments is a judgment call based on an individual market. There is no “across-the-board” figure for square footage, garages, or lot size. It is up to you to determine the actual adjustment figures—which is why it’s so important to familiarize yourself with your market.

Building a home may cost $100 per square foot, but that doesn’t mean you add $100 for every extra square foot. The price of a new build or addition is determined based on the entire house. Comps factor in individual variables, like square footage, bedrooms, baths, and market fluctuations.

Related: 3 Real Estate Deal Analysis Rules Investors MUST Know

Usually, you will see appraisal adjustments of $20 to $40 per square foot for above-grade square footage and less for basements. The higher range is usually for a more expensive house with a higher build quality.

Screenshot 2023 02 27 at 10.25.47 PM


Based on the real estate comps, the subject property is worth $182,500.

A Quick Overview of Rental Comps

Rental comps are just as important as sales comps when purchasing a rental property. Knowing how to find comps and accurately assess them will directly impact whether you’re able to achieve profitable rental deals and help you determine if a particular rental property is a good investment.

You’ll be looking at many of the same features and factors for rentals as sales comps. Look at the living area square footage, age, location, and bed/bathroom count. However, a wider variety of factors impact rentals, such as nearby gyms, pet groomers, and restaurants.

Finding Rental Comps

You can use Trulia and Zillow to find rental comps, just like for sale comps. Rentometer.com is also a good option. It has a free tool for instantly getting a rough estimate of area rents and showing you where prices fall within the whole market.

But it’s also up to you to do your own research. There can be a huge difference between asking rents and actual rents. One house might be asking $1,500 a month. An identical unit next door could have just been leased for $800. It’s hard to know online because this data isn’t provided like actual recorded sales comps.

If you see a rental that has been on the market for 90 days, then that is a good indication the market is not willing to pay that. The market—aka renters—will always tell you whether a property is too expensive.

Pay attention to the number of rentals on the market. If there are too many, landlords are going to have to fight hard for any tenants and may have to come down a lot by making concessions.

Finding and using real estate comps for investors should always be a more thorough process for investors than it is for individual buyers and sellers. After all, an individual buyer or seller has only one objective to meet: qualifying for the mortgage, which will be tied to the formal appraisal anyway. The formal appraisal eliminates the chances of a wild under- or over-estimation of a home value which could result in a buyer being unable to make mortgage payments.

A real estate investor has to think more long-term, with maximizing ROIs being the main long-term objective. For this reason, running a thorough comps analysis pays off (literally). As an investor, you may find that using an online real estate comps tool saves you time and gives you more in-depth results than doing your own number crunching based on public records – although that’s still a good place to start if you want to get a general idea of the local market.

Next, you need to remember that real estate comps for investors take into account much more than just sales prices. Factors like the exact home size, type, and whether it’s had any modifications or renovations also play a part. 

Finally, remember: if you can learn to accurately apply adjustments to comparable sale or rental properties, it greatly improves your—and ensure your continued real estate success.

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.